A Chinese Base for Drug Research

The past three years have been a dizzying ride for Ge Li, the founder of Shanghai-based WuXi PharmaTech.

Li, 37, started the contract research company in 2001 when he returned home to China after 12 years of living in the U.S. He tripled his sales in the 2002–03 fiscal year and expects sales to double again this year. Within a year or two, Li will be employing 500 scientists. U.S. competitors that had earlier expressed doubts about PharmaTech's capabilities are now trying to cooperate with the firm, he says.

PharmaTech's rented labs in Shanghai's Waigaoqiao Free Trade Zone are like an R&D mall of the world's most famous drug companies. One room handles projects for Sumitomo Chemical, another room takes care of Merck & Co. projects, and scientists in the next room work for another major pharma company. In one conference hall, a researcher from Eli Lilly is giving a seminar. Most researchers are wearing safety glasses, a rare sight in China, and the hallways are fitted with emergency showers.

It's early in PharmaTech's fourth year of operation, and the firm is completing construction of its own premises, also in Waigaoqiao. PharmaTech has invested $12 million in the free trade zone, with $5 million going into imported instrumentation. Li says that being in the zone allows PharmaTech to import instruments and spare parts tax-free, saving the company about $1.5 million. Lab chemicals imported from abroad take only about a week to reach PharmaTech, he adds, so waiting for missing materials does not unduly disrupt research projects.

About two hours away, at the opposite end of Shanghai, PharmaTech has invested another $6 million in a current Good Manufacturing Practices-certified plant that will provide active pharmaceutical ingredients in kilogram or ton quantities for customers who want to initiate toxicology studies or clinical trials on samples generated by PharmaTech. The Shanghai firm is thus moving downstream from contract research and the provision of milligrams or grams of samples. For zoning reasons, the plant had to be located in a different part of the enormous city.

Li initially formed PharmaTech to provide contract research services to Chinese companies. In 1999, while the head of research at Pharmacopeia, he had gone to China to establish a research joint venture. The venture was never set up, but Li saw an opportunity to create China's first pharmaceutical contract research organization.

He formed PharmaTech with three other partners: Xiaozhong Liu, a mathematician and physicist who is now executive vice president; Tao Lin, who is in charge of internal operations; and Zhaohui Zhang, who handles domestic marketing. As if foreign drug companies had been long awaiting the opportunity to farm out some of their work to China, it was immediately easier to sign up foreign customers than Chinese ones, Li says.

Li says one reason PharmaTech has been so successful is its customer focus. He says the firm's employees routinely stay at work until 10 or 11 PM to communicate with overseas customers during their office hours. He maintains it's not a problem that most of his company's employees are more fluent in Chinese than English. "Communication and language are different things. You can communicate well even if you don't master the language perfectly," he says.

PharmaTech has designed a tracking system that allows customers to follow the progress of their projects, much like Federal Express users can log onto the company's website to see where their package is. "Two days before a project is due, the system automatically sends a reminder to the researcher involved," Li says. "And if he or she misses the deadline, the system notifies his or her boss."

One would think it difficult for PharmaTech to secure quality talent in China. The students who are admitted to the science departments of the top Chinese universities are a small elite of superbright people, but they tend to move abroad after graduation.

Li argues that there is not much difference in quality between the graduates who leave China and those who stay. Some remain for personal reasons, not because no foreign university wants them, he says. Moreover, he adds, a firm like PharmaTech provides an incentive for bright people to stay in or return to China. For example, Shuhui Chen, who holds a Ph.D. from Yale and is now PharmaTech's chief scientific officer, was a senior research scientist at Eli Lilly in the U.S. before returning to China. For all practical purposes, Li says, the talent pool in China is "unlimited."

Once he employs 500 scientists, or about 700 total employees, Li says he'll slow down the company's growth for a while, more because he wants to catch his breath than because he lacks resources. His success has attracted the attention of international investment banks who are trying to convince him to take their money.

Pharmaceutical research can be an immensely complex area, but Li's business concept is simple. In pharmaceutical contract research, he says, "high quality at low cost will win out."

Li

GIVE ME MORE At this Shanghai plant, WuXi PharmaTech will soon start making larger quantities of the chemicals it produces in gram quantities in its labs. PHOTOS BY JEAN-FRANÇOIS TREMBLAY